Kenya Airways said on Friday that the Government of Kenya has approved a $350 million shareholder loan, equivalent to about Sh45.15 billion, to cover operating obligations the airline says it cannot defer.
In the same announcement to the Nairobi Securities Exchange and the Capital Markets Authority, the national carrier disclosed that it has negative equity, meaning its liabilities exceed its assets. A separate government plan to convert about Sh122 billion ($941 million) in existing loans into equity is designed to reverse that.
The board said the loan will keep the airline operating while it carries out its long-term turnaround plan. The money is earmarked for aircraft maintenance, returning grounded aircraft to service and other critical operational needs. Cabinet, which approved the funding earlier on Friday, put the figure at Sh45.4 billion. The difference reflects the exchange rate each side used.
The loan has a 10-year tenor, according to the company. At the government’s option, it may be converted into equity as part of a future capital restructuring, subject to shareholder and regulatory approvals, or repaid early on terms still to be agreed. Conversion would increase the government’s ownership.
The National Treasury already holds 48.9% of the airline, according to Kenya Airways, ahead of KQ Lenders Company 2017 Limited at 36.3% and KLM Royal Dutch Airlines at 7.76%.
The government has also given in-principle approval to convert about Sh122 billion in existing shareholder loans, together with accrued interest, into an equity-qualifying tradeable instrument.
That is almost three times the size of the new loan. The airline said the conversion is intended to move it from negative to positive equity and strengthen its balance sheet and creditworthiness. It would also prepare the ground for a long-term capital raise through the market, using an Investment Memorandum, and for bringing in strategic partners and investors.
Neither measure is final. The company said both still require definitive transaction documents, shareholder approval where needed, approvals or no-objections from the CMA and the NSE, and other statutory, regulatory and third-party consents.
Kenya Airways has issued a cautionary notice, advising shareholders and investors to exercise caution when dealing in its shares until the terms are announced. The notice will be renewed at intervals of no more than 60 days. The announcement was signed by Habil Waswani, Acting Group Managing Director and CEO.
The loan follows a wider first-half loss. Kenya Airways lost Sh16.08 billion ($124 million) in the six months to 30 June 2026, up from Sh12.15 billion ($94 million) a year earlier, according to its unaudited results. The new loan is equal to roughly two and a half times that six-month loss. Total income rose 9% to Sh81.25 billion ($627 million), but total operating costs rose 14% to Sh91.9 billion ($710 million), so costs grew faster than revenue. The board said jet fuel prices rose 66% during the period, which it linked to geopolitical tensions in the Middle East, and the airline’s fuel costs rose 32%.
Capacity fell 9% with aircraft out of service, while cabin factor, the share of available seats filled, improved by four percentage points. The airline said a Boeing 787-8 resumed operations in mid-July and a Boeing 777-300ER has been delivered and returned to service.
Kenya Airways returned to profit in 2024, posting a full-year profit of Sh5.4 billion ($42 million), its first in more than a decade.
What to watch
Kenya Airways said it will make further announcements once definitive agreements are signed and material terms are settled. The National Treasury has told Parliament that it and the airline are seeking a strategic investor, with a target of December 2026 to finalise the process.
Chairman Kiprono Kittony has put the airline’s capital need at $1.5 billion (about Sh194 billion), more than four times the loan approved on Friday.